Finding More Net Profits From Your P&L with DavidPresented by Dave Ashcraft (Business Resource Services) and Scott K. Wilder (Intuit)

1. Profit Mastery: Unlocking More Hidden Profits from your QuickBooks Presented by Dave Ashcraft ashcraft@brs-seattle.com Business Resource Services Seattle, Washington December 3 rd , 2008

2. What You Will Learn 1. 4-Step Process to perform Price/Volume/Cost Analysis 2. How changes in pricing affect the sales volume needed to break-even 3. How to determine contribution Margin

3. Why Businesses Succeed 1. Plan properly before start up 2. Monitor financial position 3. Understand the relationship between price, volume, and costs 4. Manage cash flow 5. Manage growth 6. Borrow properly 7. Plan for transition

10. Accountants P&L 3,457,200 3,714,500 3,910,000

14. How Do Fixed Costs Behave? TIME S A L E S FIXED COSTS Manage the Creeper Costs Step 1

16. How Do Fixed Costs Behave? TIME S A L E S FIXED COSTS Manage the Creeper Costs Step 1 $ Capacity $

17. How Do Fixed Costs Behave? TIME S A L E S FIXED COSTS Manage the Creeper Costs Step 1 $ Capacity $

18. 3,457,200 3,714,500 3,910,000 Step 1 Separating Fixed & Variable Expenses

19. Step 1 Separating Fixed & Variable Expenses 3,457,200 3,714,500 3,910,000

20. 3,457,200 3,714,500 3,910,000 Step 1 Separating Fixed & Variable Expenses

21. STEP 1 Fixed Expenses: $ Management Salaries & Office Payroll $ Rent $ Depreciation $ Telephone $ Insurance, etc. Variable Expenses: $ Food $ Paper $ Rebates/Reimbursements $ Hourly Wages $ Taxes associated with Hourly Wages $ Royalties $ Advertising (National) = $ Total Fixed Costs = $ Total Variable Costs $ Revenue

22. STEP 1 Fixed Costs = $1,264,000 Variable Costs = $2,646,000 Sales = $4,200,000 Managed P&L $1,554,000 Contribution Margin

26. Determine Contribution Margin Sales %* - Variable Cost % = * Sales % will always be 100% STEP 3 Contribution Margin %

27. Determine Contribution Margin Sales %* - Variable Cost % = * Sales % will always be 100% STEP 3 EXAMPLE 100% - 63% = Contribution Margin %

28. Determine Contribution Margin Sales %* - Variable Cost % = * Sales % will always be 100% STEP 3 EXAMPLE 100% - 63% = 37% Contribution Margin %

32. Break Even Break Even Sales = $ 3,416,216 How Much Profit?

33. Break Even Break Even Sales = $ 3,416,216 Actual Sales = $ 4,200,000 How Much Profit?

34. Break Even Break Even Sales = $ 3,416,216 Actual Sales = $ 4,200,000 Difference = $ 783,784

35. Break Even Break Even Sales = $ 3,416,216 Actual Sales = $ 4,200,000 Difference = $ 783,784 X .37 Contribution Margin or “ What's Left” from each dollar in sales

36. Break Even Break Even Sales = $ 3,416,216 Actual Sales = $ 4,200,000 Difference = $ 783,784 X .37 Operating Profit = $ 290,000

39. Break-Even If I cut or add a fixed cost how will it impact the volume of sales I need to Break-Even? Fixed Costs = $1 Contribution Margin is 37%

40. Break-Even Fixed Costs = $1 Fixed Costs = $1 CM% 37% or .37 Contribution Margin is 37% If I cut or add a fixed cost how will it impact the volume of sales I need to Break-Even?

41. Break-Even Fixed Costs = $1 Fixed Costs = $1 CM% 37% or .37 $1 = $2.70 37% or .37 Contribution Margin is 37% If I cut or add a fixed cost how will it impact the volume of sales I need to Break-Even?

42. Break-Even Fixed Costs = $1 Fixed Costs = $1 CM% 37% or .37 $1 = $2.70 37% or .37 Contribution Margin is 37% For every $1 of fixed costs eliminated the sales volume needed to break-even is reduced by $2.70! If I cut or add a fixed cost how will it impact the volume of sales I need to Break-Even?

43. Break-Even Fixed Costs = $1 Fixed Costs = $1 CM% 37% or .37 $1 = $2.70 37% or .37 Contribution Margin is 37% For every $1 of fixed costs added the sales volume needed to break-even is increased by $2.70! If I cut or add a fixed cost how will it impact the volume of sales I need to Break-Even?

44. What If ? Fixed Costs = $1 Fixed Costs = $1 CM% 20% or .20 $1 = $5.00 20% or .20 Contribution Margin is 20% If I cut or add a fixed cost how will it impact the volume of sales I need to Break-Even? For every $1 of fixed costs eliminated the sales volume needed to break-even is reduced by $5!

45. What If ? Fixed Costs = $1 Fixed Costs = $1 CM% 20% or .20 $1 = $5.00 20% or .20 Contribution Margin is 20% For every $1 of fixed costs added the sales volume needed to break-even is increased by $5.00! If I cut or add a fixed cost how will it impact the volume of sales I need to Break-Even?

47. Break-Even Current Cost Structure Sale Price 1.00 Variable Costs .63 Contribution Margin .37 Fixed Costs $300,000 If I lower prices how will it impact Break- Even? NOTE: Break-Even Steps 1-3 have been completed

48. Break-Even P&L B/E Sales ? 100 Variable Costs 63 Contribution Margin 37 Fixed Costs 300,000 Profit 0 % $

49. Break-Even P&L B/E Sales ? 100 Variable Costs 63 Contribution Margin 37 Fixed Costs 300,000 .37 Profit 0 % $ ÷ STEP 4 Fixed Expenses Contribution Margin %

50. Break-Even P&L B/E Sales 810,811 100 Variable Costs 63 Contribution Margin 37 Fixed Costs 300,000 .37 Profit 0 % $ ÷ STEP 4 Fixed Expenses Contribution Margin %

51. Break-Even Current Cost Structure Sale Price 1.00 Variable Costs .63 Contribution Margin .37 If I lower prices how will it impact Break- Even? Revised Cost Structure Sale Price .90 Variable Costs .70 Contribution Margin .30 Price lowered 10%

52. Break-Even Current Cost Structure Sale Price 1.00 Variable Costs .63 Contribution Margin .37 If I lower prices how will it impact Break- Even? Revised Cost Structure Sale Price .90 Variable Costs .70 Contribution Margin .30 Variable Costs Sales 63/90 = .70

53. Break-Even Current Cost Structure Sale Price 1.00 Variable Costs .63 Contribution Margin .37 If I lower prices how will it impact Break- Even? Revised Cost Structure Sale Price .90 Variable Costs .70 Contribution Margin .30 Contribution Margin = Sales-VC=CM 100-70=30

54. Break-Even P&L B/E Sales ? 100 Variable Costs 70 Contribution Margin 30 Fixed Costs 300,000 Profit 0 % $ Price lowered 10%

55. Break-Even P&L B/E Sales ? 100 Variable Costs 70 Contribution Margin 30 Fixed Costs 300,000 .30 Profit 0 % $ ÷ STEP 4 Fixed Expenses Contribution Margin % Price lowered 10%

56. Break-Even P&L B/E Sales 1,000,000 100 Variable Costs 70 Contribution Margin 30 Fixed Costs 300,000 .30 Profit 0 % $ ÷ STEP 4 Fixed Expenses Contribution Margin % Price lowered 10%

57. Break-Even P&L B/E Sales 1,000,000 100 Variable Costs 70 Contribution Margin 30 Fixed Costs 300,000 .30 Profit 0 % $ ÷ Price 10% Volume 23.5% STEP 4 Fixed Expenses Contribution Margin % Price lowered 10% Old Break-Even was $810,011

59. Break-Even Current Cost Structure Sale Price 1.00 Variable Costs .63 Contribution Margin .37 If I raise prices how will it impact Break-Even? Revised Cost Structure Sale Price 1.10 Variable Costs .57 Contribution Margin .43 Price increased 10%

60. Break-Even Current Cost Structure Sale Price 1.00 Variable Costs .63 Contribution Margin .37 Revised Cost Structure Sale Price 1.10 Variable Costs .57 Contribution Margin .43 Variable Costs Sales 63/110 = .57 If I raise prices how will it impact Break-Even?

61. Break-Even Current Cost Structure Sale Price 1.00 Variable Costs .63 Contribution Margin .37 Revised Cost Structure Sale Price 1.10 Variable Costs .57 Contribution Margin .43 Contribution Margin = Sales-VC=CM 100-57=43 If I raise prices how will it impact Break-Even?

62. Break-Even P&L B/E Sales ? 100 Variable Costs 57 Contribution Margin 43 Fixed Costs 300,000 Profit 0 % $ Price raised 10%

63. Break-Even P&L B/E Sales ? 100 Variable Costs 57 Contribution Margin 43 Fixed Costs 300,000 .43 Profit 0 % $ ÷ STEP 4 Fixed Expenses Contribution Margin % Price raised 10%

64. Break-Even P&L B/E Sales 697,674 100 Variable Costs 57 Contribution Margin 43 Fixed Costs 300,000 .43 Profit 0 % $ ÷ Price 10% Volume 13.9% STEP 4 Fixed Expenses Contribution Margin % Price raised 10% Old Break-Even was $810,011

65. $1 above Break-Even B/E Sales 697,67 5 100 Variable Costs 57 Contribution Margin 43 Fixed Costs 300,000 .43 Profit 0 % $ ÷

66. $1 above Break-Even B/E Sales 697,67 5 100 Variable Costs 57 Contribution Margin 43 Fixed Costs 300,000 .43 Profit 0 % $ ÷

67. $1 above Break-Even B/E Sales 697,67 5 100 Variable Costs 57 Contribution Margin 43 Fixed Expenses 300,000 .43 Profit 1 % $ ÷

68. $1 above Break-Even B/E Sales 697,67 5 100 Variable Costs 57 Contribution Margin 43 Fixed Expenses 300,000 .43 Profit .43 % $ ÷

69. $100,000 above Break-Even B/E Sales 797,674 100 Variable Costs 57 Contribution Margin 43 Fixed Expenses 300,000 .43 Profit 43,000 % $ ÷